"There is only one power that determines the course of history . . . the power of ideas." — Ayn Rand

Thursday, November 16, 2017

Studebaker Review, Part 5: Conclusion

Studebaker highlights the period “between the 1930’s and the 1970’s, [when] the United States drastically reduced economic inequality” through wealth redistribution policies. Well, let’s take a look.

First, the 1930s:

Consider two depressions—the one starting in 1920 and the one starting in 1930. The 1920 depression was actually the sharper downturn. Yet, the 1920 depression ended in 1921, followed by a powerful job and innovation filled boom under the relatively free market Coolidge policies. The 1930 collapse (which succeeded the 1929 stock market crash) lasted 4 years, followed by economic stagnation and depression that didn’t end until Truman took over and WW 2 ended. It’s utterly ridiculous to say that economic inequality caused the Great Depression. Both the 1920 and 1930 downturns were corrections to the inflationary Federal Reserve policies. But the differing aftermaths were the result of the differing federal policies in response to the downturns. In 1920, Wilson (and later Harding) did nothing but let the economy run its course. In 1930, Hoover responded with “a whirlwind of intervention,” which was followed by FDR’s even bigger whirlwind, which he largely built upon Hoover’s policies. The result was not a quick recovery and boom but a 15 year Great Depression. (See my review of 1921: The Forgotten Depression.)

The myths surrounding Hoover, FDR, and the Great Depression have come under scholarly scrutiny in recent decades and are being corrected. The 1930s depression was caused and exacerbated by government interventions. Obama’s policies are a weaker version of FDR,s so of course we have the weakest recovery in American history.

Likewise, Studebaker blames the 1970s on the oil price shocks engineered by the OPEC oil cartel. But the 1970s “stagflation” followed the big regulatory welfare state expansion of Johnson and Nixon, as well as Nixon’s abandonment of a gold-backed dollar. The job and innovation-filled 1980s/90s expansion followed the Carter/Reagan deregulations and Reagan tax rate cuts. In 2001, big government resurfaced, and the results were predictable. the economy sagged. But economic inequality and alleged lack of consumption are not causes of economic stagnation. The ups and downs of the economy correlate roughly and inversely with the increase or restraint in government intervention.

What about the 1950s? That period of 91% income tax rates was marked by chronic recession and rising unemployment, which led John F. Kennedy to run, and win, on a platform of “getting America moving again.” He cut income tax rates across the board, bringing the top rate down to 70%, paving the way for 1960s recovery. The actual history of the 1950s through the 1980s is laid out in JFK and the Reagan Revolution: A Secret History of American Prosperity by Lawrence Kudlow and Brian Domitrovic.

Even by Studebaker’s macro viewpoint, his conclusions don’t make any sense. A glance at Studebaker’s chart showing inequality trends between 1913 and 2012 shows a clear correlation between rising inequality and a rising economy. I can point to more macro data to show this. Despite all of the Leftist shouting about inequality—which, of course, has increased—“the masses” are getting better, not worse as the propaganda would have us believe. As Pew research reports, every world economic income classification—low, middle, high, and upper—increased between 2001 and 2011. Only one category—extreme poverty—declined, from 29% to 15%. Progress continues. According to the World Bank, extreme poverty worldwide is now about 10%. This is no coincidence. True, some people get rich by graft and pull. But, by and large, fortunes are market driven.

And periods of market-driven “extreme inequality” correlate with periods of rapid economic progress, not depression. In the U.S., the period between the Civil War and World War 1, and the “Second Industrial Revolution” between 1980 and 2010 are two periods marked simultaneously by rising economic inequality, rapid technological advance, and rapidly rising living standards as entrepreneurs seized on the relatively increased freedom to flourish, pulling the rest of us up with them. Correlation doesn’t prove causality, of course. But the mass-market products that fill the lives of consumers and the millions of people who flock to work for the entrepreneurs’ companies is proof. Again, relate to “individuals and personal narratives.” Now, its spreading around the world. Who would want to shackle “the 1%”—the best, brightest, most visionary, and most ambitious? Not anyone concerned with “lifting the poor,” or of reversing the alleged decline of the middle class.

And since the world is getting richer overall, the consumer market is bigger overall. It follows that the rewards for creating mass-market products increases commensurately. Simple statistics show growing inequality, but not the whole story. Of course the “wealth gap” is larger. Fortunes of the most productive entrepreneurs are larger because the sheer numbers of consumers is larger. The attack on the so-called “1 percent” is an attack on all of us, in the same way as the oppression of any group hurts us all.

Studebaker’s article is so full of fallacies, omissions, and non sequiturs that it would take a book to refute; in fact, books have been written. But on one thing I’ll agree with Studebaker—the Clinton/Sanders rivalry matters more than people think. It’s not so much a matter of policy: Clinton’s policies aren’t all that different from Sanders’. It’s ideological. It’s a battle between the old Left and the New Left—which means, between the mixed economy welfare state and explicit nihilistic, totalitarian socialism.

The old Left—e.g., JFK, Humphrey, Carter, Bill Clinton—was primarily concerned with lifting the poor, and their welfare state policies reflected that. Despite her recent politically expedient New Left-style rhetoric, I see Hillary as one of the last of the old Left. The New Left—e.g., Obama, Elizabeth Warren—is nihilist to its core. It is primarily concerned with destroying economic success, based on a radical egalitarian vision that runs counter to human nature. Ideologically, if not by age, Sanders is squarely with the New Left. Yes, the 2016 Clinton/Sanders rivalry does matter. Will Sanders’ Leftward/statist,collectivist lurch prove to be a temporary thing? Or did he pull the Democrats permanently more toward socialism? I think the latter. And that’s not good.

About Me

Greetings and welcome to my blog. My name is Michael A. (Mike) LaFerrara. I sometimes use the pen or "screen" name "Mike Zemack" or "Zemack" in online activism, such as posted comments on articles. “Zemack” stands for the first letters of the names of my six grandchildren. I was born in 1949 in New Jersey, U.S.A., where I retired from a career in the plumbing, building controls, and construction industries, and still reside with my wife of 45 years. The purpose of my blog is the discussion of a wide range of topics relating to human events. My analysis is informed by the principles of Objectivism, the philosophy of reason and independence originated by Ayn Rand.

As Rand observed: “The professional intellectual is the field agent of the army whose commander-in-chief is the philosopher.” I am certainly not the philosopher. But neither am I a field agent, or general. I am a foot soldier in that Objectivist army that fights for an individualist society in which every person can live in dignified sovereignty, by his own reasoned judgment, for his own sake, in that state of peaceful coexistence with his fellow man that only capitalist political and economic freedom can provide. While I am a fully committed Objectivist, my opinions are based on my own understanding of Objectivism, and should not be taken as definitive “Objectivist positions.” For the full story of my journey toward Objectivism, see my Introduction.

One final introductory note: I strongly recommend Philosophy, Who Needs it, which highlights the inescapable importance of philosophy in every individual's life. I can be reached at mal.atlas@comcast.net. Thanks, Mike LaFerrara.

Recommended Essays/Videos

Quotes I Like

Let me give you a tip on a clue to men’s characters: the man who damns money has obtained it dishonorably; the man who respects it has earned it. Run for your life from any man who tells you that money is evil. That sentence is the leper’s bell of an approaching looter.—Francisco d'Anconia

I love getting older...I get to grow up and learn things. Madalyn, 5 years old, Montesorri student, and my grand-daughter

The best thing one can do for the poor is to not become one of them. Author Unknown

Nature, to be commanded, must be obeyed. Francis Bacon

Freedom is never more than one generation away from extinction. Ronald Reagan

Thinking is hard work. If it weren't, more people would do it. Henry Ford

Intellectual freedom cannot exist without political freedom; political freedom cannot exist without economic freedom; a free mind and a free market are corollaries. Ayn Rand